DO YOU KNOW HOW MMA SPONSORSHIP WORKS?

In the lead up to the coming weekend’s ONE FC Summit, we will be posting various articles on the topics that will be discussed at the summit. Here is an extremely in-depth article on MMA sponsorships: how the sponsors think, how the deals operate, and what a fighter can expect. This piece, by Ben Fowlkes, was published on MMAFighting here.

It’s a shirt some fighter wears to the cage and then struggles to pull back on to his sweaty torso in time for the post-fight interview. It’s a banner his cornermen unfurl behind him during the pre-fight introductions. It’s a website on the seat of his shorts.

You see it, even if you never think about it. But because you see it, because you’re watching, fighters are getting paid. They might make anywhere from a couple grand that’s barely worth mentioning after their manager takes a 20 percent cut, to hundreds of thousands of dollars on an endorsement deal that will change their lives forever.

For many fighters, sponsor money means everything. It’s the difference between prospering and just getting by. It’s something they talk about among themselves, but rarely in public. It’s the hidden undercurrent of the MMA economy.

As fighter agent Lex McMahon explained, “Younger guys who are just starting out in their careers and are in their first contract with the UFC, they’re probably making quite a bit more in sponsors than they are from fighting.”

All this, just to reach you, the fan, who hardly gives any of it a second thought. Is it worth it? That depends on who you ask. Do fighters depend on it for their financial well-being? Absolutely. And as you learn when you take a closer look, it’s a complex economy buzzing with frenzied activity behind the scenes of every MMA event you watch.

The Cost

If you’re a company looking to sponsor a UFC fighter, the hit to your pocketbook varies depending on everything from the fame and popularity of the fighter you’re doing business with to the location of your logo. Walk-out T-shirts can be among the most expensive items, sometimes edging into the six-figure range, while a small decal on the thigh of his shorts might only run you a couple thousand dollars.

“Where you want the placement depends on how much you want to pay,” said Training Mask CEO Casey Danford, who added that he usually prefers to put his logo on the rear of the shorts when sponsoring a wrestler, and on the crotch when sponsoring a striker.

“Sometimes guys come to us because their sponsors got kicked out of the UFC or because they took a fight last minute and don’t have any other sponsors,” Danford said. “That does happen. On the last-minute deals, it’s not like we’re giving them top dollar, because they’re coming to us at the last minute. We work with the fighters and they work with us, because they know that two weeks before a fight, most of our budget is already used up.”

The UFC requires fighters to get prior approval for every sponsor they intend to represent on their shorts and banners — hence the threat of being “kicked out” — but just to get the right to be seen on a UFC broadcast most companies pay a fee to the UFC — the discretionary sponsor “tax” that was also recently instituted in Strikeforce after Zuffa bought the promotion.

While few sponsors or agents wanted to discuss actual figures on the record, most put the cost of the tax at about $50,000 per year for the majority of apparel and supplement companies in the UFC, though the fee has been known to vary according to the sponsor and the situation, sources said.

That sponsorship fee alone recently chased military-themed clothier Ranger Up out of the fight night sponsorship business. Despite his company’s long-standing relationship with Strikeforce fighter and Army Green Beret Tim Kennedy, Ranger Up’s Nick Palmisciano said he couldn’t justify the cost of putting a logo on Kennedy’s shorts for his recent Strikeforce bout with Robbie Lawler.

“A lot of people were fired up about this, but we’re not in any way angry at Zuffa at all,” Palmisciano said. “We understand why they do it, but I also can’t, in good conscience, pay that.”

Since Palmisciano’s company sponsors relatively few fighters, he explained, the potential benefit just didn’t justify the cost. Six months might go by without a single one of his guys fighting, but he’d still be required to pay the tax for that period.

“When you think about what that tax costs us per fighter as opposed to what it costs another brand like Dethrone, who’s sponsoring two, three, four fighters every event, for us there’s almost no return on in-fight sponsorship,” Palmisciano said.

The effect of the tax is and will continue to be most noticeable on Strikeforce cards, according to many fighter agents and industry sponsors. While it might be worth it for some companies to pay the fee in order to reach the larger UFC audience, the smaller viewerships for Strikeforce on Showtime aren’t necessarily valuable enough to justify the expense for many others, meaning Strikeforce fighters take a big hit in sponsor pay.

At the same time, according to fighter agent Dean Albrecht, there are benefits to Zuffa’s sponsor tax, even if it shrinks the pool of available sponsors.

“Not all up-and-coming companies can afford to pay [the tax],” Albrecht said. “But the companies who can afford to pay it, usually you have less risk with them, because you know they’re a better capitalized company. So believe it or not, the UFC in effect is protecting the fighters by putting a monetary entry fee to the sponsorship game. Before, when anybody could sponsor a guy, you’d have companies not paying and that hurts everybody.”

In fact, in the days before the tax, non-payment was more of an issue, according to both sponsors and managers. Most of the deals are constructed so that sponsors pay after the fights rather than before, and some were offering more money to fighters than they actually had, betting that they’d sell enough merchandise in the weeks following the fight to come up with the fighter’s fee.

Ken Clement, co-owner of MMA equipment manufacturer Hayabusa, said the tax has largely chased those companies out of the sponsorship game. Before, Clement said “we actually had managers come to us and say, ‘Hey, do you know what happened to this company? They owe us money.'”

Part of the problem, he added, is that some companies have unrealistic expectations to go with their pricey sponsorship goals.

“Some of these companies think they’re going to come in here and get these huge, immediate results, and that’s their plan for how they’re eventually going to pay these guys,” said Clement. “A lot of them are agreeing to deals that they’re never going to be able to afford to pay. The UFC putting that tax into place is like, if you can’t afford to pay that tax, you’re probably not going to be able to pay your fighters.”

The Benefit

One thing every MMA sponsor seems to agree on is that getting your logo seen on a UFC broadcast does not, by any means, guarantee sales or success. Exactly what it does accomplish is a matter of some debate, with results proving difficult to measure.

“It’s trackable, but it’s very hard to be objective,” Hayabysa’s Clement said. “It’s the simple question of how many fans watching the UFC saw your logo and recognized it, and of those, who cares? …It can be looked at quantitatively, but there’s a lot of guesswork involved.”

As Ranger Up’s Palmisciano put it, if you’re looking for a simple equation where you spend a certain amount on a fight night sponsorship and make more than that in sales immediately afterward, you’re in the wrong game.

“I think one of the reasons you see so many of these companies failing is because they come into this business thinking, I’m just going to sponsor as many fighters as I can and people will see my stuff and start buying my shirts. It’s just not true,” Palmisciano said. “I’ll tell you honestly, the uptick [in sales] from any fighter wearing our shirt in the cage does not ever make up for how much we pay that fighter. Ever.”

But according to fighter agent Dean Albrecht, it all depends on what a company’s specific goals are. The way he sees it, there are three distinct levels: advertising, sponsorship, and endorsement.

“The lowest level is advertising,” said Albrecht. “For example, I’ve got a guy who’s going to be on the main card for UFC 135. I can sell you a patch on his shorts on the butt, the thighs, or the crotch, or I can sell you his hat or his shirt. Now, there’s probably going to be around 800,000 pay-per-view buys, they estimate about an average of ten people [watching every buy], so there’s around eight million people. But we can’t tell you whether your ad’s going to last thirty seconds or fifteen minutes.”

Advertising is exactly what Training Mask is after, according to Danford. Instead of getting into long-term contracts with tiered pay structures, he prefers to sign one-fight deals for flat fees, all designed to get his company’s logo in front of potential customers. And because that’s what he’s after, that’s also a big part of deciding which fighters he chooses to sponsor.

“You’ve got to think, we’re buying advertising space,” Danford said. “So do I want to see a guy end the fight in 20 seconds? Absolutely not. It happens, but that’s not what we’d like to see. Whether I’m paying $3,000 or $15,000, I don’t want to see the guy get knocked out in 30 seconds. I want to see the fight go 15 minutes.”

Because Danford’s product is also aimed at serious athletes with the promise of improving their conditioning, he also tries to choose fighters whose cardio works as an advertisement for the product.

Of course, he added, “you don’t know if you’re winning or losing when you pick these guys.” When UFC heavyweight Roy Nelson turned in a sloppy performance against Frank Mir, for example, it wasn’t a great help to have Training Mask written across his shorts. But when Chris Lytle went three hard rounds with Dan Hardy before submitting him in his memorable farewell fight, it was an unexpected boost.

“I don’t question the exposure,” Danford said. “We’re building a brand. Any time you’re building a brand, you’ve got to have it in front of people. It’s like Tiger Woods and Nike. Nike’s not in your face the whole time, but as the ball slowly drops into the hole, there’s that Nike swoosh and you know Nike was there for that moment. With Chris Lytle, there’s his last fight and we were there. We didn’t know going in that it was going to be his last fight, but we were there.”

But other companies, such as Hayabusa, don’t see the benefit in simply using a fighter as advertising alone. What it’s after is more in the category of sponsorship, supporting a few key fighters over a longer period of time. The idea, according to co-owner Clement, is that those fighters will also become ambassadors for the products in the gym, where they’ll be reaching the audience Hayabusa is really after.

“They’re the sneezers,” Clement said. “They’re influencing all the guys around them who want to reach that elite level. The other guys in the academy are looking at him and thinking, how can I get to that level?”

That’s why, according to Clement, a Hayabusa fighter like Yoshihiro Akiyama, who has now lost three straight in the UFC, is in no danger of losing his deal with them simply because he’s fallen on hard times. An advertiser might jump from one fighter to another, but Clement explained, “We’ve been supporting [Akiyama] for a long time, and there’s a relationship there. It’s not like we’re going to drop him because he loses.”

Sponsorship deals typically cost a company more than simple advertisement and require more of a commitment, but for fighters and their agents, the big money is in endorsement, which sits at the top of Albrecht’s hierarchy of sponsor arrangements

“There’s a premium for that, it’s exclusive, and you’re expecting that guy to be a spokesperson for you,” said Albrecht. “He’ll do appearances, and you can expect him to only wear your stuff. If he’s with you, he’s wearing your stuff when he’s out and about, he’s wearing it into the cage, he’s wearing it when he’s at after-parties. That’s endorsement.”

That’s what clothing maker Dethrone Royalty is after, and also why it works with a select few fighters and keeps them draped in Dethrone shirts no matter where they are. According to founder Nick Swinmurn, Dethrone also makes a conscious effort to find its fighters before they’re stars.

“We have big names now, but we started with them back when they were on their first televised cards, not big names at all,” said Swinmurn, who started Dethrone after founding online shoe retailer Zappos. “Our strategy from the beginning was, we don’t want to be that brand where we’re on the guy who’s wearing a different shirt for every fight. We wanted to kind of build that value where, when they show past highlights of a fighter, he’s wearing Dethrone for every fight.”

Of course, there’s another benefit to locking a young fighter into a long-term endorsement deal early in his career, Albrecht pointed out, especially if you have reason to believe that he’s going to become a star in a hurry.

“Some companies are really smart with who they pick, and they lock them up while they’re coming up,” said Albrecht. “They say, we’re going to get this kid for $4,000 a month, and for the first six or seven months it’s going to seem like a deal. It’s going to look like you’re overspending for him. Then all of a sudden, he’s two fights away from a title shot and you’ve got a one-year option on your deal. You exercise that option, and you might have a champion for the same price as an up-and-comer, or maybe just a little bit more.”

The Pitch

When you talk to fighter agents about the pursuit of willing sponsors, you hear a lot about establishing cooperative relationships and ensuring value for both sides. When you talk to the sponsors themselves, you sometimes get a different story.

“A lot of the managers try to coax you into doing stuff that you don’t want to do,” said Training Mask CEO Danford. “They’ll tell you, ‘For this much we’ll give you plugs on Twitter and one on Facebook.’ That’s stuff they should be doing anyway.”

Some, said Dethrone’s Swinmurn, are simply hard to pin down on a price.

“If I call up a manager and say, ‘I’m interested in this guy, how much is it?’ their job is to be able to say, ‘It’s this.’ But I’ve known some managers, and there’s a couple who are notorious for it, where you just can’t get a straight answer out of them,” Swinmurn said. “You ask how much and they say, ‘Make us an offer.'”

Others will simply oversell their sponsorship space, creating too much clutter and drowning out any single sponsor’s message. That’s particularly troubling for a sponsor like Hayabusa, which is in the rare position of actually having its product used during the fight. That is, if anyone can tell through the sea of other logos.

“You get some management companies where it’s the NASCAR effect. He’s got so many logos on there, you don’t know what he’s wearing anymore,” said Ken Clement. “It could be Hayabusa shorts, but you have no idea.”

In order to convince wary sponsors that they’re getting good value for their money, managers and agents have to get creative. That’s why Albrecht said he gives each sponsor a monthly spreadsheet detailing the exposure they got from each fighter, across every conceivable medium.

“I get every MMA magazine out there,” Albrecht said. “We watch all the shows. I have people that work for me who will sit there with a stopwatch and time how long your logo is on TV. They’ll also go through every magazine this month and clip out anywhere where your logo appeared. Then we’ll go through the top six MMA websites and see how many times your logo appears in photos.”

As Albrecht explained, the benefit of sponsorship isn’t limited solely to fight night. Whenever a website uses a photo of a fighter that includes a sponsor logo on his shorts or T-shirt, there’s value in that.

“For example, I represent Rory MacDonald and I’ll look at how many websites showed his picture wearing his sponsor logos, then look at how much it would cost me to put an ad on that website,” said Albrecht, who estimated that roughly half of MacDonald’s annual income is derived from sponsorship deals.

MacDonald’s name was mentioned by just about every sponsor I talked to as an example of an ideal fighter to support. He’s young, rising quickly through the ranks (though not yet commanding top dollar), and his personality outside of the cage doesn’t make him a potential liability.

Others have certain built-in barriers that agents have to work around.

For example, a fighter who has struggled publicly with legal or personal problems might not be someone every company wants to put its name on. Some, Albrecht said, are simply too irresponsible or mercurial to be the kind of guy a company can depend on to show up at a major event, smiling like he actually wants to be there.

“Some guys can do it. They show up and you wish you’d hired them to be president of your company,” Albrecht said. “Other guys, that’s just not who they are.”

Other fighters, Albrecht added, simply won’t do certain things.

“Miguel Torres, for instance, will not wear a [sponsor] hat,” said Albrecht, who added that the former WEC 135-pound champ and proud mullet owner once turned down $10,000 to wear a sponsor’s baseball cap for the brief walk to the cage.

But not everything is based on personality. Some is based purely on exposure, which is why agents are so grateful that the UFC has continued to find new ways of making sure each fight gets seen.

A few years ago it was only the main card of a pay-per-view, plus a couple quick undercard fights (time permitting) that made it onto TV. Now, with undercard bouts aired on Spike TV and prelims streamed live on Facebook, there’s no such thing as a dark match on a UFC card.

“Certain companies are embracing [the Facebook fights] more than others,” said agent Lex McMahon, who added that it’s still unclear what the Facebook exposure is worth.

“A fight that was previously dark is now getting seen by potentially millions of people. It may take time for the industry to sort out and assign that a value, but it will happen,” McMahon said. “It just hasn’t really happened yet.”

As with any new medium, some companies value it more than others, and some say they actually prefer to sponsor fighters on the Facebook fights. For one thing, McMahon pointed out, prelim fighters usually demand a significantly lower price tag than those in the main event. But it’s not just about bargain-shopping, he said.

“Maybe I’m a company that has a call to action in my ad that takes someone to a website. Someone at a fight or watching at a sports bar won’t be able to jump on a computer, but if you’re watching it on a computer, you’re a lot more likely to do it.”

The end result is not only more fights for fans, but more money for fighters. The UFC’s deal with FOX has the potential to do the same thing on an even greater level when it brings UFC fights to network TV, but in the end it may not jack up prices on existing sponsors the way many are expecting.

“MMA sponsors, they’ve already assigned value” to UFC events, McMahon said. “There’s some horse trading that goes on, but they have an idea of value that’s been already established.”

Instead, bringing fights to FOX could expand the pool of potential sponsors, giving agents more opportunities to sign new deals.

“The real value of having a fighter on that FOX main card is going to be getting those sponsors that want to be on FOX anyway, but aren’t MMA sponsors,” said McMahon. “Trust me, any manager worth his salt is already looking at the companies that sponsor heavily on FOX and are already looking at pitches for their guys, should they end up on a FOX card. I guarantee you we have.”

The Bottom Line

When fans look at the official reported payouts for any given event, they aren’t seeing a true accounting of what each fighter made. The UFC’s “locker room bonuses” aside, sponsor pay accounts for such a large portion of fighters’ income that most make at least as much from their sponsors as they do from the promotion that employs them.

As middleweight Tim Kennedy found out once Zuffa purchased Strikeforce and the tax left him suddenly without any sponsors, that’s a financial strategy that is not without risk.

“It’s a pretty gigantic problem,” he said before his fight with Robbie Lawler in June. “Half of my income was pretty much just [sponsors]. It’d be like, whatever your salary is at AOL, they said, ‘We’re just going to pay you half of that now.'”

The tax may have shrunken the pool of sponsors, but the increasing popularity of MMA and the UFC has led to higher payouts from those that are still in the game, said Albrecht.

“I’ve said for a couple years that it’s going to get tougher, but the numbers are going to get bigger. It’s going to get more crowded in the agency business, but the pay-off is going to get bigger.”

As McMahon explained, that’s the only way some fighters scrape by in their first few fights with the UFC, which requires full-time work to be successful, but doesn’t always pay full-time wages to prelim performers.

“Even though guys just starting out aren’t making a ton of money in that first contract, they can still make a decent living through sponsors, and it’s by virtue of being in the UFC and having that exposure,” said McMahon. “That’s worth a lot more to sponsors than being on a regional card that gets shown on HDNet. You’re in the best promotion in the world, and there’s some value that goes with that.”

In the end, the value comes from the fans, who probably put the least thought into the whole situation. They’re the ones who are the potential customers that every sponsor hopes to reach. As long as they’re watching, sponsors are paying. And as long as sponsors are paying, fighters (and agents) are smiling.

The opinions of the author do not necessarily reflect those of MMA-in-ASIA.com.